S.D.N.Y Denies Motion to Dismiss RMBS Claims Against JPMorgan Chase

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On February 26, Judge Jed S. Rakoff of the federal district court for the Southern District of New York issued a memorandum explaining the reasoning for his September 2012 order denying JP Morgan’s motion to dismiss a lawsuit against it in connection with the sale of $1.6 billion in RMBS. The suit, brought by FSA Asset Management and Dexia, alleges claims under New York law for fraud, fraudulent inducement, aiding and abetting fraud, negligent misrepresentation and successor liability. Plaintiffs claimed that JPMorgan and affiliated entities made fraudulent misrepresentations concerning the riskiness of the securitizations at issue and the underlying loans. The court found that plaintiffs: (a) pleaded the elements of their fraud and fraudulent inducement claims with sufficient detail, (b) provided enough facts to sustain a claim for aiding and abetting fraud, based on allegations that Bear Stearns Co. and JPMorgan Chase & Co. directed the purported fraudulent activity of subsidiary companies and received profits in return, and (c) stated claims for negligent representation based on allegations that the defendants induced the plaintiffs into a relationship of trust, convinced them to forego their own diligence and provided them with deceptive information. Decision.

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